Republican States Swallow Their Pride on Medicaid Expansion

Pennsylvania and now Utah are joining other Republican-run states that have decided to say yes to the expansion of Medicaid under the Affordable Care Act after all, after obstinately deciding to say no after the Supreme Court effectively made expansion optional more than two years ago.

All of this is treated as news, but fact is it was predictable at the time, and in fact it was predicted right here on the Health Business Blog. The only surprise is that it’s taking this long. I discussed the ruling with Dan Mendelson, CEO of Avalere Health on June 29, 2012, the day after the Supreme Court’s decision. Here’s how the discussion went:

Williams: So does [the ruling] mean that there will be a hodgepodge with some states doing the expansion and some not, or is it more nuanced than that?

Mendelson: I think in reality most states, or I would even venture a guess that all states will be compelled to take the expansion, because remember that the federal government pays for the entire expansion until 2017 and then thereafter the subsidy rate is around 90%, so you’d really have to be a rogue state to refuse that.

Or put slightly differently, if you’re the governor of the state, how are you going to stand up in front of your electorate and say, ‘I’m not going to cover people near poverty because I’m worried about the out-year liability that we might incur, and therefore I’m going to turn down the federal government’s largesse.’ I think it would be very difficult for a state to do that.

Williams: So essentially the Court was saying that a stick should come out of the hands of the federal government, but the fact that the Affordable Care Act includes pretty significant carrots, it means that from a practical standpoint this is not a lot of change?

Mendelson: That’s right, and that’s how we did the Children’s Health Insurance Program back in ’97 and ’98. There was a generous subsidy that was put on the table and the states decided that they wanted to cover children or that they had to cover children and it wasn’t long before 50 states had adopted that expansion.

And I think that in this case as well, it is quite likely that unless someone really wants to make an unabashed political statement that states will go ahead and cover these folks who are near poverty.

So far the South is solid in its rejection of Medicaid expansion, except for Arkansas. Look for that to change in 2015, even if the GOP takes the Senate.